Do They Think We are That Dumb?

Do the Democrats really think we are that dumb?

We continue to hear about the compromise that “Cuts taxes for Millionaires.” Hmmm….

So…let me do some Democrat math here. $1,000,000 = $200,000. I know I went to a pretty good high school and a pretty good college. I’m not sure how someone making $200,000 is a millionaire.

Sorry to inform everyone, but there is only one tax cut in the entire compromise. It cuts taxes for Millionaires? No – it extends the current tax rate for everyone. It does not cut tax rates. But yet, they continue to harp that Millionaires and Billionaires are getting tax cuts. And now, the lefties in the House have delayed the bill.

Really? Do they not understand that by not voting passage of this bill, they will be raising taxes across the board? They will be denying unemployment benefits? Also, do they not understand that the Estate tax they are now whining about is actually an INCREASE over 2010? Remember, the estate tax is set at 0% for 2010 – this is an increase to 35%.

The only tax cut in the entire bill is the 2% reduction in the Social Security payroll withholdings. You currently pay 6.2%. If this goes through, you will pay 4.2% for one year. This will put dollars back in your pocket – and better than the “making work pay” credit that Obama and the Dems passed in the stimulus bill two years ago. That gave you less money in your paycheck ($8 per week average) and it affected your tax return. This will give you more in your pocket – and won’t affect your tax return. Keep in mind that the Making Work Pay credit will expire on 12/31.

I’m not a fan of the bill tossing in all of these other subsidies that aren’t paid for. I am somewhat a fan of the Unemployment extension – even though I don’t believe this is the best stimulus for the economy as Pelosi states (you get $2 per $1 invested…hell, we should make everyone unemployed and double our money!) But I think that the federal extensions should come with strings. You get your 26 weeks of state unemployment. On week 27, you are required to perform 4 hours of community service. This increases by ½ hour a week for the next 72 weeks. Then it’s over. By the end of the 99 weeks, we would have volunteers in our community working 40 hour weeks to earn their unemployment checks. I’m sure the community organizer in the White House who encouraged all Americans to give back to the community would support this.

http://change.gov/americaserves/

He calls on High School and College – why not the unemployed?
Overall, pass the bill. It’s not perfect from any side of the aisle – but this is how compromise works. We get a little, you get a little. Neither of us fully likes it, but it’s the best for both sides.

Apparently, that’s not how it works in Washington.

My daughter just told me a great joke:

If Pro is the opposite of Con, what is the opposite of Progress?

Bush Tax Cuts - To Extend or Not to Extend for the "Fat Cats"

Ahhh….tax regulation reform. Everyone’s favorite time of year. Unfortunately, the current administration is wanting to let the Bush Tax Cuts expire – if not all of them, certainly the ones for individuals making $200K or married at $250K. Gang…this is a really, really, really, bad idea and will hinder further growth in the economy. Don’t think so? Let’s look at an example:


Let’s say for example, myself and a partner open an LLC business to build homes. We sell 1 house per month at $250,000. By any standards, this would be considered a small contracting operation.

Now let’s assume that all expenses (before taxes) are $180,000 for materials, subcontractors, and we both take a salary of $30,000 per year and will split the profits at the end of the year. Here’s what we have so far:

Annual Gross Sales: $3,000,000
Annual Expenses: $2,160,000
Annual Profit: $840,000

Sounds pretty good so far doesn’t it? $420,000 per year – each. But we forgot something. We want to have a 4 month supply of operating expenses. Let’s face it – we’re in home building and the market can be hit or miss right? The lumberyard also wants us to pay for our materials in 14 days – so we need the cash reserves.

So, 4 months of expenses - $720,000 in the bank. Let’s do the math again:

Annual Gross Sales: $3,000,000
Annual Expenses: $2,160,000
Annual Profit: $840,000
Cash Reserves: $720,000
Balance for distribution to owners: $120,000

So we both get $60,000 in cash from the company and are on solid footing – each making $90,000. But hold on…..we haven’t paid our income taxes yet.

What is not being realized in discussing the “Fat Cats” making $200K or $250K per year is that we have an LLC…….

In an LLC, you report your share of the income from the LLC on your personal income tax form. Ultimately, a K-1 form will be generated and given to the owners. So our K-1 will show $60,000 right? WRONG!

The K-1 will show $420,000. Why? According to the IRS reporting guidelines, the profits are to be reported WHETHER OR NOT THEY ARE DISTRIBUTED! So our cash reserves are FULLY TAXABLE! And taxed at the HIGHEST tax bracket which the administration seems hell bent on raising..oh, sorry, letting expire. See, LLC’s are not taxed as an entity. You pay the taxes on your personal return.

http://biztaxlaw.about.com/od/businesstypesincometax/f/llctaxprocon.htm

LLC Owners must pay taxes on their distributive share of the profit of the company, even if they have not received a distribution of those profits.

So in this example, I’m a “Fat Cat” taking home Gross income of $90,000 per year. BUT I report $450,000 in income.

There’s a great delusion that letting this tax expire is on Wages….It’s not…It’s based on AGI or Adjusted Gross Income. So what is the point of opening this business? I can’t see one. Not to put $45,000 a year or less in my pocket.

Now that seems like a really good stimulus to me. Kill the guy who is trying to make a living and creating jobs.

This is certainly change…but seems to be lacking the hope…..